April 13, 2016Vol 3 | Issue 3

www.soundexchange.com1

Growth of Streaming Means More Royalties for Music Creators

Streaming has surpassed music downloads as the biggest source of revenue in the music

industry, according to data distributed by the Recording Industry Association of America (RIAA).

That has fueled our growth at SoundExchange by increasing the performance royalties we

collect and distribute to music creators.

In 2015, SoundExchange distributions of $803 million represented 16 percent of the recorded

music industry’s wholesale revenue — revenue to record labels and artists — which reached

$4.95 billion last year, according to the RIAA’s data.

In This IssueGrowth of Streaming Means More Royalties for Music Creators 1

SoundExchange Direct Gives Artists, Authorized Reps Crystal Clear View into Account Info 2

SoundExchange ISRC Search Site Brings Clarity to Data 4

Perfect Match: SoundExchange Helps Recording Artists Find Their Royalties at SXSW 5

Satellite Royalty Rate Case Moves Forward 7

Events 9

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Streaming accounted for 34.3 percent of the recorded music industry market in 2015, while downloads

accounted for 34 percent of the retail market.

The growth of streaming has been dramatic in recent years, increasing from 7 percent of retail revenue

in 2010 to more than 30 percent last year.

Streaming generated $2.4 billion in revenue in 2015, a 28.5 percent increase over 2014 revenue, when

streaming revenue reached $1.86 billion. Music downloads generated $2.3 billion in revenue in 2015, a

10 percent decline compared to 2014 revenue.

SoundExchange Direct Gives Artists, Authorized Reps Crystal Clear View into Account Info

SoundExchange Direct (SX Direct) has become an indispensable tool for tens of thousands of recording

artists, rights owners, and their authorized representatives — business managers, agents, lawyers and

accountants — less than two years following its launch.

That’s because SX Direct is the fastest, most efficient way for people to review statements and manage

their accounts.

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The SX Direct main page.

SX Direct allows users to easily dive into their payment data and verify or update their account

information. Some of the key features of SX Direct include:

u An interactive view of recent revenue data by song and by service

u Full payment history and statements archive, back to 2012

u 24/7 online access to review and update account information

u Ability to submit repertoire data and Letters of Direction

Another key feature enables users to share account information via the portal with invited guests,

including business managers, accountants or bandmates.

In 2016, more than 400 people are using SX Direct each day to monitor their SoundExchange account.

The growing popularity of SX Direct is a direct result of its utility and functionality.

Improving SX Direct and increasing usage among recording artists and rights owners remains a top goal

of SoundExchange. While SX Direct includes numerous interactive features, we continue to research

enhancements to the website to ensure that it remains user friendly and provides as much data and

value to users as possible.

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Gaining access to SX Direct is easy. Anyone who receives a payment from SoundExchange is eligible to

sign up for SX Direct, and we send invitations to users several times each year.

To request access to SX Direct or to ask questions about the service, please send an email to

accounts@soundexchange.com or call 1-800-961-2091.

SoundExchange ISRC Search Site Brings Clarity to Data

Just over a month ago, we launched the SoundExchange ISRC Search Site and it has already become

a vital tool for an industry in search of better data on sound recordings.

SoundExchange unveiled the site on March 8, providing a free, publically accessible online tool that

allows all recording artists, rights owners, music services and music lovers to instantly access the

industry’s best data on International Standard Recording Codes (ISRCs) and related sound recording

information.

“Our ISRC Search Site is a critical step in the right direction towards accurate data in the music

marketplace,” SoundExchange President and CEO Michael Huppe said.

The SoundExchange ISRC Search Site makes visible sound recording metadata linked to the ISRC

identifier and is updated daily with data on new recordings. Currently, the database includes nearly

20 million unique ISRCs as provided to SoundExchange by rights owners. While ISRC data is available

elsewhere, it has not been provided in such a comprehensive manner until now.

Industry organizations have praised the new website for providing greater clarity about sound

recording data.

“In an industry with enormous amounts of conflicting and elusive data, SoundExchange has taken

a major step in the right direction toward transparency and the accuracy of data exchange directly

benefitting all artists,” said Carlo Zappavigna, general manager, Premier Muzik International.

That clarity is intended to ensure fast, accurate identification of sound recordings, and better data

helps ensure the correct label or artist is paid a performance royalty when the recording is streamed by

webcasters such as Pandora and satellite radio service Sirius XM Radio.

As Billboard reported, “in recent years, there has been an increasingly urgent call through the music

industry for improvements in how data is standardized and attached to copyrighted works.”

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The SoundExchange ISRC Search Site “represents an important milestone in the music industry’s often

fitful effort to bring its scattered record-keeping up to date with the myriad ways music is used and

consumed today,” according to Concurrent Media.

We already are planning updates to the SoundExchange ISRC Search Site. Look for more improvements

in the future. The International Federation of the Phonographic Industry (IFPI), which manages the ISRC

system globally under an appointment from the International Organization for Standardization (ISO),

selected the SoundExchange repertoire database to power the ISRC lookup capability on its own

IFPI.org website.

Perfect Match: SoundExchange Helps Recording Artists Find Their Royalties at SXSW

Recording artists and rights owners will receive tens of thousands of dollars in performance royalties

as a result of our efforts during the 2016 South by Southwest Music and Media Conference (SXSW) to

register music creators.

For the third year in a row at SXSW, we hosted an event during the festival to meet the people we

represent and ask them to register with SoundExchange so we can pay them the performance royalties

we have collected on their behalf. More than 450 people attended our event at Iron Works BBQ.

“Our goal is to get every dollar in royalties into the hands of the appropriate recording artists and

rights owners as fast as possible,” SoundExchange President and CEO Michael Huppe said. “South by

Southwest gives us a unique opportunity to do that every year, but registering artists and rights owners is

a year-round effort, so we will continue to do all we can to educate the entire music community about

performance royalties and the need to register with SoundExchange.”

Charli XCX at the SOUNDExchange SESSIONS at Stubb’s BBQ during SXSW 2016.

Photo credit: Brandon Fuller for SoundExchange

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Prior to SXSW, we cross-referenced our list of unregistered

artists with the lineup of talent scheduled to perform at the

annual festival.

In all, we spoke with more than 1,000 artists and rights

owners between our events at Iron Works, the SXSW Artist

Lounge and Stubb’s BBQ.

While SXSW helped us track down those who attended

the music festival, we realize there are many recording

artists who could not attend the festival but have royalties

waiting for them. If you think we have royalties for you,

please check our database of unregistered artists and

rights owners. We can only pay recording artists and rights

owners once they’ve registered.

If you haven’t registered — or know someone who hasn’t

registered — it’s important to know that it’s never been

easier to receive performance royalties because of our

online registration tool.

Chris Castle discussed in his recent Music•Technology•Policy blog post just how easy it is to register to

receive performance royalties. SoundExchange paid $803 million in performance royalties in 2015. We

manage over 134,000 registered accounts, and we currently pay out at least 95 percent of royalties to

rights owners and recording artists on the tracks used by the digital music services within three years.

Check out our sizzle reel from SXSW 2016 by clicking the image below!

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Satellite Royalty Rate Case Moves Forward

With a decision on “Web IV” behind us, the Copyright Royalty Board’s (CRB) attention has turned to

rates for Sirius XM satellite radio (also known as Satellite Digital Audio Radio Services, or “SDARS”) and

Preexisting Subscription Services (PSS).

A decision on the upcoming “SDARS III” rate case will establish royalty rates from 2018-2022 for Sirius

XM and for two services in existence prior to 1998 that deliver audio-only music programming to cable

and satellite television packages, Music Choice and Muzak.

The CRB in March 2016 issued its scheduling order for SDARS III, with the “voluntary negotiation” period

officially beginning on March 14.

If the parties are unable to reach a settlement, the clock will begin ticking on a lengthy process of

discovery and the submission of proposals and statements. Unless the schedule changes, a hearing will

begin February 27, 2017, and could last several weeks.

The statutory rate for SDARS was 10 percent of revenues in 2015, then rose to 10.5 percent in 2016

and will increase to 11 percent in 2017. (Sirius XM also pays at separate rates for its other platforms.)

SoundExchange represents all recording artists and copyright owners in these proceedings, and we

advocate for rates that fairly reflect the value of music. We also strongly believe in the value of statutory

licensing.

If past is prologue, Sirius XM, Music Choice and Muzak will seek rates that are lower than what we think

is fair. As part of that, we expect them to try to create “evidence” of a market rate by negotiating deals

outside the scope of the statutory licensing framework. While that’s perfectly legal, copyright holders

should understand how any deals they may do are likely to be used.

We’ve explained Sirius XM’s strategy in past rate-settings before.

Direct deals could provide a precedent during the SDARS III royalty rate proceeding and undermine

recording artists and record labels by establishing artificially low royalty rates. That is exactly what

happened in the Web IV royalty rate proceeding.

SoundExchange represents all recording artists and copyright owners in these proceedings,

and we advocate for rates that fairly reflect the value of music. We also strongly believe

in the value of statutory licensing.

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As Billboard reported, the CRB based the rate for non-subscription performances on two direct

licenses between labels and webcasters who were already using the statutory license — meaning those

webcasters could always fall back on the statutory rate and walk away from negotiations if the labels

sought something higher.

The CRB used those two deals to set the non-subscription statutory rate for all labels. And the CRB

based its rate decision on certain parts of the consideration in the deals, not all of the consideration that

the labels had bargained for.

So while “marketplace” deals could benefit the satellite radio service and certain rights owners, they

could have an additional impact on all recording artists and record labels as part of the rate case.

Even though we administer statutory licenses, SoundExchange recognizes that direct licenses are

happening in the marketplace, and we certainly won’t treat anyone less favorably if they enter into

such licenses.

In fact, in the event that labels choose to make direct deals, SoundExchange is willing to administer

those negotiated licenses (and actually does so for over a dozen current deals) as long as the relevant

artists receive 50 percent of the royalties directly from SoundExchange. Aside from direct payment to

artists, other benefits of SoundExchange administering direct deals include:

u An extremely low administrative rate to process the royalties (4.6 percent in 2015)

u Rapid payment (SoundExchange is the only sound recording CMO in the world to pay monthly)

u Ability to clarify data errors and ownership conflicts

Whether to enter into a direct license with Sirius XM is entirely your decision. SoundExchange does not

advise record companies about what is best for their businesses. Nor are we privy to the terms

and conditions of direct deals.

While rights owners can and should strike whatever deals make sense for them, they should be fully

informed in their decision-making and fully informed of the potential consequences those deals may have.

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Events

2016 NAB Show

April 16-21

Las Vegas, Nev.

RAIN Summit West 2016

April 17

Las Vegas, Nev.

27th Billboard Latin Music Conference & Awards

April 25-28

Miami, Fl.

11th Annual ASCAP “I Create Music” EXPO

April 28-30

Los Angeles, Calif.